Cars and Motorbikes: Innovative Designs Pay, but They Need Time
MARKETING |

Cars and Motorbikes: Innovative Designs Pay, but They Need Time

A MARKETING SCIENCE PAPER BY GAIA RUBERA SHOWS DESIGN INNOVATIONS ARE NOT IMMEDIATELY ACCEPTED BY THE CONSUMER, BUT PRODUCTS WHICH INCORPORATE THEM HAVE HIGHER SALES GROWTH RATES

A new study by Gaia Rubera (Department of Marketing) explores the effects of the introduction of a new design on product sales evolution over time. The research published by Marketing Science (Design Innovativeness and Product Sales’ Evolution, first published online: October 3, 2014) provides evidence that, even if design innovativeness diminishes initial sales, then it increases sales growth rates.
 
In the last years design has gained prominence over technology, and many companies focus on design innovation to ward off commoditization and to stimulate demand. However, introducing a new design requires significant investments for a company. It is important, therefore, to understand the effect of design innovativeness, defined by Rubera as “the degree of novelty in a product’s external appearance”, on product sales. The literature, so far, has largely focused on technological innovation, and therefore it can provide only partial answers about design innovation. This is why Rubera decided to investigate the effect of design on product sales in two product categories in which design is a critical factor that consumers consider in their purchase decisions: car and motorcycle. Rubera analyzes the yearly product sales of all car and motorcycle models introduced in the U.S. from 1978 to 2006 and from 1980 and 2008, respectively.
 
Drawing on demand-side and supply-side arguments and using individual growth curve analysis, Rubera finds that greater product design innovativeness leads to lower initial sales but then to higher sales’ growth rates. Specifically, the first three years after the introduction, car/motorcycle models are better off if they have lower design innovativeness. In the fourth year, models have similar sales regardless of their level of design innovativeness. The benefits in terms of extra units sold for models with higher design innovativeness becomes evident at the fifth year on. Thus, managers should be prepared to initially receive cool acceptance for products whose design dramatically differs from the norm. Pulling the plug too soon would cause products with a radical design to waste their sales potential. Using the results of the analysis, the author is able to estimate that, by taking an average price of $31,252, the revenues of a car model increase by $434 million per each increase in design innovativeness over the average car’s lifetime of 8 years. Similarly, considering an average price model of $14,000, revenues increase by an additional $25 million for each increase in the design innovativeness of a motorcycle model over an average lifetime of 8 years.
 
The study however provides even more insights. Rubera in fact explores also the interaction effects between design innovativeness and technological innovativeness. Indeed, managers introducing new technologies face the following dilemma: Should they use a familiar design to establish a link with existing products, thereby reducing the risk that consumers face – like Tivo’s resemblance to a VCR – or propose radically new forms to mark a clear contrast with existing technologies – like the Toyota Prius? Rubera finds that design and technological innovativeness have a negative interaction effect on initial sales, but a positive effect on sales growth. Finally, the findings show that brand strength and brand advertising expenditures worsen the negative effect of design innovativeness on initial sales, but boost its positive effect on growth rates. This finding has great managerial interest, especially in the current competitive scenario where new brands from emerging markets are threatening the position of many established brands. The results suggest that weak brands can use design innovativeness to gain ground on strong brands, but the benefits of this strategy are short-lived. In the long-run, design innovativeness looks more like a shield that strong brands can leverage to widen the gap with competitors.
 

by Paola Zanella
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